2HRS2GO: Traditional software packages drive Intuit along

3 January 200211:43 am AEDT

Believe it or not, some people still handle their money the old-fashioned way. Or at least old-fashioned in computer time, which means, oh, about four years at most.

Most PC users -- let alone the rest of the world -- still don't use the Web to pay their taxes, or balance their books. Which brings us to the world of financial software king Intuit Inc. (Nasdaq: INTU)

Intuit: A Web company?

Analyst consensus predicts third quarter earnings of 70 cents a share for Intuit, which is scheduled to release its quarterly report tomorrow. It's pretty easy to guess what fueled Intuit during the quarter, given that the period included the climax of tax season.

For all of the hype about the Web replacing traditional software, Intuit's financials demonstrate change isn't happening all that quickly. "The reality is, Intuit has a large desktop business that is still growing," says David Farina, analyst with William Blair & Co. "Most people like to conduct business using traditional packaged software.

Intuit is trying to branch out onto the Net, with the Quicken.com website. But although Web business is growing rapidly, it still makes up less than 15 percent of the company's revenues, by most analysts' estimates. For the fiscal year, Farina expects web-related business to generate $90 million -- out of an expected $750 million-plus in revenue.

"I'm not sure how high it (Internet revenues) can get," says Farina, who thinks the Web could, possibly, maybe, perhaps, might make up a third of Intuit's revenue within five years. "Can Intuit cross over from getting advertising revenue to getting revenue from actual transactions?"

Shares of Intuit are certainly starting to get Web-like valuations. Even with today's 3 percent drop, the stock is trading at roughly 60 times estimated earnings. And that's with Intuit heading into the two slowest quarters of its fiscal year.

Intuit does have a core business growing at 18 percent annually. And we're talking about a company that performed a minor miracle by defeating Microsoft in an area of desktop consumer software. With that kind of history, there's certainly nothing to worry about Intuit's long-term future.

But at least for the next few years, it'll still be an old-fashioned future.

Other issues:

Gateway 2000 Inc.

(NYSE: GTW) Ted Takes Manhattan as Gateway opens its first NYC retail outlet. More important, the company is trying anything (ISP, CMGi investment) to avoid getting hammered by the continuing drop in PC prices. Unfortunately, neither ISPs nor CMGi have demonstrated much in the way of profit-making ability so far.

Prodigy Inc.

(Nasdaq: PRGY) Speaking of ISPs that can't make money, Prodigy just signed a DSL deal with Bell Atlantic. Can broadband pull the venerable online company back into prominence?

Macromedia Inc.

(Nasdaq: MACR) The maker of multimedia software will give away the source code for the Flash player. People would be more impressed if the company went open source for something that costs money, instead of a plug-in that's already a free download.

The overall technology market was retreating in mid-afternoon trading. The Nasdaq Composite Index was down 49.68 to 2470.46, and the Dow Jones Industrial Average had fallen 111.49 to 10717.79. 22GO>